Age and Price Ceilings: What are Yours?

This is not a very original line of inquiry. I’m guessing lots of other bloggers have visited it over the years. Indeed, I have a dim memory of having proposed something along similar lines some years ago in a discussion on What Does John Know?–back when it was a daily stop for me. But instead of being all negative and accusing me of beating a long dead and highly boring horse, why not laud me instead for my daring retro post on Throwback Thursday? That’s the spirit!

At any rate, this question occurred to me again after the brief exchange yesterday in the comments on my review of the utterly ordinary Kavalan King Conductor that is to retail in the US for $109.99: what should the price threshold be for whiskies in particular age ranges?

Now, I know different people will have different responses, and I also know that none of this discussion is going to carry any weight with the people who actually set the prices. It’s still interesting to me to find out what other people’s thresholds are–and so I hope you will chime in below. It may be a quixotic question in the era of NAS whisky but tilting at windmills is one of my core competencies.

Here’s my current thinking on the ceilings I would impose if I were made Czar of Whisky Pricing:

Older NAS whisky and genuinely limited editions and experimental bottlings to be dealt with on a case by case basis. I would cap things like the Glenmorangie Signet and the Mackinlay’s Shackleton Malt at $150 and say that the Balvenie Tun 1401s are fine at $209.99 (which is where they seem to start in Minnesota). Exceptions to be made as well for cask strength variations on regular expressions (as, for example, with the Laphroaig 10) and cask strength NAS bottles (such as the Uigeadail).

Now you may say that I’m too directly tying age and price together. Sure. But please note that I’m not tying age and price and quality. I am not saying that a 25 yo should be twice the price of an 18 yo because it is likely to be twice as good. A 25 yo may well be no better or worse than a 10 yo (I sometimes feel that way about the Laphroaig 10 and 25, and certainly about the new Talisker 25 and the Talisker 10). I am just assuming there are incremental costs and risks associated with longer aging, and also the opportunity cost of not bringing more younger/middle-aged whisky to market sooner and adjusting for those. And I’m asserting that it makes sense to tie price to these variables than to the absolutely subjective variable of taste: i.e. I am unwilling to pay thrice as much for a whisky made exactly the same way as another merely because the company tells me they added some invisible secret sauce to it. That way lies madness as every distillery will produce whisky that they will insist tastes more expensive than the price they could charge for it if they put an age on it–in other words, exactly what’s happening with young NAS whisky. I am, however, willing to pay some extra for visible difference in “materials cost” (whether it is the costs of aging or specific production costs involved with special barrels etc.).

But this stuff is not really what I’m most interested in here (though if you want to explain how I’ve completely misunderstood the economics of whisky production, be my guest)–I’m primarily interested in finding out where fellow geeks set their basic thresholds when pondering purchases: at what price points do whiskies of particular (or no) age statements stop seeming like good deals and at what points does it feel like the companies are taking the piss? Everyone will likely have differing answers, but I’d like to hear yours.

In the meantime, the distilleries I can think of that pass my system at all points of the spectrum are Glenfarclas, BenRiach, Glencadam, Glen Moray, Ardmore, AnCnoc/Knockdhu and Bladnoch (though who knows what will happen with new ownership). Of these Glenfarclas really stands out as they have a large number of regular bottlings: 10, 12, 15, 17, 21, 25, 30, 40, and they all pass.

There are others who don’t have regular old expressions and whose younger and middle-aged expressions pass: Aberlour, Old Pulteney, Clynelish. Distilleries that pass at the low end but fail spectacularly at the high end include Laphroaig and Highland Park. Springbank fails at all levels (in the US at least); so, alas, does Talisker. Most pass at some point on the spectrum but fail elsewhere (Bowmore, Bunnahabhain, Lagavulin).

Anyway, that’s enough from me: where would you set your ceilings and are there other distilleries that pass mine that I have not listed?

I can’t believe I forgot Tomatin. In fact, I am now going to introduce the Tomatin Corollary: If a distillery gives us a 12 yo for less than $30, a 15 yo for less than $50 and a 18 yo for less than $70 then they get to charge $600 for their 40 yo.

My limits mostly agree with yours. I’d give single cask bottlings another $10-20 of wiggle room, because the production costs for those are higher. Cask strength gets scaled by alcohol content. There are also exceptions – I’d gladly pay $70-80 for that Blackadder Ledaig 6 Year that Michael and I reviewed a while back because it really did taste that good – but those are few and far between. I know that my limits were set by the prices that have been filtering in over the last year or two. I’ve been drinking whisky just long enough to remember when it wasn’t impossible to find good 12 YOs for $30-35, so paying a whole lot more than that just doesn’t feel right, e.g. Tamdhu 10 coming to the States at $60.

Yeah, I drew a line in the sand with the Tamdhu 10. I paid $20 for the old one and there is no fucking way I am paying $60 for the new one just because it’s sherried and comes in a cross between a Coke and aftershave bottle.

I think the combination of creeping prices on established labels and the high prices people are willing to pay for young whisky from newer distilleries has distributers thinking that the sky is the limit. Talking to friends who are not booze nerds, even $30 is consider a pretty sizable outlay for a bottle of liquor. When the entry-level bottle from a well-established distillery is twice that, I don’t see how they’ll be able to get enough sales volume. Kilchoman can get away with their pricing structure because they just don’t have that much whisky to sell. Tamdhu may have been silent for a while, but their capacity is something like 4.5 million liters a year. That’s a lot of whisky to move out the door.

Do you pay local sales tax on whisky in the States and is this included in your totals? I expect UK duty and VAT is slightly higher than the US, thus I would add a few pounds (c. £5) to your suggested figures. The contents of NAS vary extraordinarily, e.g. A’Bunadh was released here at £35, which I think was fair, but is now an unreasonable £45. Longrow CV had some 8yo whisky but also some 14yo and merited a £33 price tag. Beyond 25 years, and even for some younger examples (Highland Park, Macallan, etc) I think the market is now so driven by the vagaries of rarity and provenance and even by speculation that it’s perhaps best to limit the scope to core bottlings that aren’t subject to allocation, etc. You will struggle to find a 40 year old under £300 in the UK outside of Glenfarclas – unless we start talking about IBs?

Truth is, for me, I rarely pay top whack these days. For example my last three purchases were Laphroaig 18 for £40, Balblair 90 for £45 and the Wine Society 25yo Islay for £33. I also buy a lot of IBs, grains and other brown spirits as there is value in these markets. I’ll happily admit that super premium whisky is out of my league, indeed I can’t regard it as anything other than a mug’s game. Sorry if that upsets people but I think things have gone silly at the top end and a correction is long overdue.

Yeah, my thresholds are before tax, which varies from state to state here (zero in some places; as high as 11% in others). Base prices vary greatly here too depending on distillery, importer/distributor and state.

A friend of mine uses a $10/year credo but that’s specifically for single cask, cask strength whiskies. Like you, that’s also a maximum and a good reputation is a requisite as well.
Like him, I also tend not to buy core-range releases; what can I say, I’m part of the problem.
I’m a firm believer that age doesn’t matter, or rather, that the flavors extracted from oak are not necessarily the flavors I’m after, and so I’ve never really held by such rules. For a while I toyed with a (Serge’s score -90)*$100 scenario, but as I think you may have noted before (or am I just projecting?) a 93 from Mr. Valentin in 2006 may be quite different from a 93 in 2014 (not that there’s anything wrong with that) so that didn’t last long.
These days, I tend to just read endless tasting notes and buy whatever sounds particularly delicious as long as it’s <$250, more or less regardless of age or score although again, this is almost exclusively for single cask, cask strength bottlings. $250 is the cut-off, by the way, because that way it works out to not more than $10/oz. and I pour short and nurse a glass for a long time.

Nate, in the abstract I agree with your take: let taste and not other factors determine price. The problem is that as no one will say that they make whisky that doesn’t taste great this logic ends with everything NAS and costing at least $250.

I do agree that age does not correlate to quality; it’s just that I can’t quite figure out what other rational baseline there can be for determining price tiers given the subjectivity of taste and the bullshit quotient of marketing stories.

I think you’re missing a point. Older whiskies aren’t exponentially more expensive because they cost more to produce. Really, what does it cost to leave a barrel in the corner of the warehouse for twenty years? No, the whisky producers are doing what the auto manufacturers do, which is to make different models to slot into different price points. A distillery’s 40yo whisky sells for $500 (or whatever) not because that figure gives them a reasonable return on their costs, but because they believe there is a prestige market for $500 whisky. Whisky was more democratic fifteen years ago, when even a stiff like me could splurge on a 25yo now and then; now, if you don’t have the jack, you don’t get in that door, any more than you drive a Lexus or wear a Rolex. Know your place, dude.

It doesn’t really answer your question, because I never really thought about it that way, but for a long time I felt willing to spend $90-100, maybe a little more, for cask strength, single cask bottles, regardless of age. Those prices have gone north, while my income has gone south (for reasons that don’t matter to anyone but me). Now, what I think of as baseline bottles–Redbreast 12CS, Nadurra, and a’bunadh–are a stretch for me at $65-70. I’m out of the game, grateful that I got to drink 20-25yo PE’s and Broras and Rosebanks back when the glut of the ’80’s was still being cleared.

I have a feeling we’ve had this exchange before–maybe back on What Does John Know? I think what I probably mentioned at the time is that with cars (or watches or shoes) there’s usually a materials difference between the price tiers. I’m not saying it maps one-to-one to the price differences, but your $40,000 Toyota will be differently equipped than your $20,000 Toyota–whether it’s amenities, more lavish use of aluminum or wood etc.. The question is whether any such distinction exists for whiskies of different ages or if the differing prices charged for them are indeed entirely arbitrary. If it doesn’t then it’s an entirely random situation. Even in the more democratic market of yore older whiskies cost more, right? Now you might say that that too is only because distilleries needed to establish what seemed like a reasonable basis for price tiers–that it is easier to convince people that age is the driver of cost and therefore quality/prestige than to try and make the case individually for each whisky they make (“unlike last year this year our 12 yo is better than our 18 yo and so it’s going to cost more”).

I’m inclined to think (hope?)–though I am completely open to correction by anyone who knows differently–that there may indeed be some differences in cost to a distillery in terms of bottling something at 5 years old, 12 years old or 25 years old: warehousing costs are one part of it; there’s also excise/duty; the loss of barrels to long-term aging (i.e barrels that could be used three to four times for very young whisky only being used once in 25 years); the risk associated with holding on to whisky for a long time (the market may crash, the warehouse roof may collapse; the whisky may get overly woody); the extended angels’ share; etc.. Again, I doubt it maps one-to-one to the price differences, and maybe the difference is not significant, but this seems like a basis for making distinctions for price. Otherwise you’re down to the stories distilleries tell us about the magic casks they found, the innovative new process they created to infuse the spirit in the cask with new flavours, the mutant nose of the master blender, secret family recipes etc. etc..

I readily admit that this is all based on uneducated, and possibly naive, speculation.

“I think what I probably mentioned at the time is that with cars (or watches or shoes) there’s usually a materials difference between the price tiers. I’m not saying it maps one-to-one to the price differences, but your $40,000 Toyota will be differently equipped than your $20,000 Toyota–whether it’s amenities, more lavish use of aluminum or wood etc.”

But in either case, it’s all about making you believe that it’s worth the difference in price. Do you really believe it costs two or three times as much to build a Lexus as a Corolla? I don’t. As Jeff suggests, the difference is that auto manufacturers have some control over what they’re selling you, while whisky makers have to deal with what’s in the warehouse. But in the end, they’re trying to do the same thing. After all, they’re both being business people with the same values.

No, as I said in my previous comment, I don’t believe that the price difference between a $20,000 Toyota and a $40,000 Toyota comes from a $20,000 difference in cost of production. But I do believe that the $40,000 Toyota has more expensive things in it. They’re not just randomly asking me to pay twice the price for something that cost exactly the same or very close to the same price to make. I would be paying far more than the value of these components in paying for the more expensive one but I would be getting actual concrete differences and not simply the vapour of prestige.

You’re suggesting that in whisky there is no comparable distinction between young whisky and old whisky–that they cost more or less the same to make and so the price difference is purely arbitrary. Perhaps that’s so; we need somebody who actually knows the economics of whisky production to tell us what the actual difference is in the cost of producing a 10 yo whisky vs. a 20 yo whisky vs. a 30 yo whisky.

But if there is no meaningful difference in cost there’s no coherent way to set prices anyway, so any system is likely to be arbitrary. In this scenario NAS does in fact make a kind of sense. If there’s no cost basis for setting higher prices for older whisky, and if we agree that age is no consistent predictor of quality then why pay higher prices of any kind for older whisky? This question would remain even if older whiskies were not as exorbitantly priced as they are today. In the world of NAS all you have is the word of the marketers who will all insist that their whisky of uncertain origin is impeccable and therefore worth whatever they want to ask for it.

So, in sum: I do realize that the difference in cost of production is not likely to be the same as the difference in price of the bottles–but I’m hoping that it might nonetheless provide an “objective” basis for setting prices.

“You’re suggesting that in whisky there is no comparable distinction between young whisky and old whisky–that they cost more or less the same to make and so the price difference is purely arbitrary.”

I don’t think that’s quite what I’m saying. If nothing else, there’s the rarity factor–there is just a lot less old whisky than young whisky, generally. And old whisky tends to have characteristics that young whisky doesn’t–*tends* to. But age is just what they’ve been selling us. You know as well as I do that there is young whisky that is specatacular, and old whisky that is tired. But quality is so subjective, which is why we are all so skeptical about the pricing of the new crop of “high-quality” NAS releases. As inexact as the correlation between age and quality is, age is at least quantifiable and certifiable, and is thus easy to sell. Outside of the special packaging that we all love to deride, there is no way for a whisky-maker to add bells and whistles to the product, the way auto manufacturers do.

“As inexact as the correlation between age and quality is, age is at least quantifiable and certifiable …”

One (of many) things that puzzles me about the whisky business is the verifiability of age statements. We hear distillers’ stories of “lost” casks all the time in promotional materials for old whiskies. If their inventory systems are so antiquated as to “lose” casks, how do we know for sure the stated ages of (any) whisky are accurate? Who verifies the age of casks being dumped? What, if any, are the penalties for cheating?

On the point of pricing of older whiskies, it probably doesn’t cost producers much to warehouse the casks. But remember that keeping a cask for an 30 years deprives them of the potential of that cask to age, say, 3x 10yo whiskies. And the angel’s share and evaporation may result in the cask being half empty or below 40% by the time it is emptied. On this basis, I can readily accept that it is difficult to produce, say, a 40yo whisky for under £300. But I agree with MAO that the retail price has to be demonstratively set relative to the cost of production in some way, otherwise we run the risk of being taken for chumps. Traditionally age statements are the best way to do this (not just in whisky I may add), at least at the lower end where rarity is not as much of a factor. A Canadian pal of mine is fond of quoting his dad (dunno if it was his own quote), “why sell ’em the steak when you can sell ’em the sizzle?” I see a lot of sizzle being talked by the industry these days, e.g.:

“Age was a thing that the industry peddled basically, because we had a lot of aged stock sitting in our warehouses, so we told everyone that the older it is, the better it is,” [Stuart] Harrington told TheShout.

“That’s not always true. Actually, age can be limiting at times. What we’ve tried to push now and promote is flavour and taste. That’s obviously far more important than age for a perceived level of greatness in a whisky.”

Jonny Cornthwaite, brand manager of Girvan whiskies, said it was important for William Grant not to price the new brand at an inferior point to single malt Scotch.

“We have a responsibility as the first major brand producing a single grain Scotch to set the standard,” he explained. “Single grain should be viewed as an accompaniment to single malt, and 25 and 30-year-old single malts cost this much too.

“This is a brave new step for us, opening up this new category in Scotch whisky.”

Interesting take on age from Harrington: we just lied to consumers before because we had a lot of old whisky to sell but, now that we don’t, the truth can FINALLY be told – age doesn’t matter, despite the fact that the OVERWHEMLING majority of top-rated whiskies have aged pedigrees. No bullshit here at all, folks, you can trust us.

I like Sku’s boycott and the POV it comes from: a recognition of a separation of industry and consumer interests, and that consumers will have to take action to reverse some of the trending that doesn’t serve them.

I’ve advocated a similar boycott be undertaken against NAS-labeled products for similar reasons – it’s a form of marketing which only benefits the industry at the expense of consumers. I’ll be interested to see if bloggers afford Sku’s boycott more support than mine because, although many bloggers often don’t want to appear openly supportive of the industry, there aren’t many who discuss consumer interests which oppose those of the industry, much less support boycott as a way of helping consumers.

If people thought of every dollar they spend as a vote for the whisky industry they’re getting rather than the one they’d like to see, they might be more careful in their purchasing.

I find myself suggesting the same thing regarding our “vote” that we cast with our money. Uncolored and unchill-filtered offerings are where my hard earned money goes in preference, but I can’t close myself off to a huge mass of malts and their glorious flavor just because they have the unfortunate disposition of being owned by Diageo, for instance. I found a lagavulin 8 for 55 USD nearby, but bought the Laphroaig 10 Cask Strength for 10 dollars more due to it being unchill-filtered. I’ll definitely buy a dram at a bar if I see it, but I can’t spend crazy money on whisky stripped of intrinsic quality.